The present invention provides an encoding and decoding apparatus used for the compression and expansion of data. A state machine is provided having a plurality of states. Each state has at least one transition pair. Each element of the transition pair comprises zero or more bits representative of the compact code to be output and the identification of the next state to proceed to. The transition pair reflects an output for a yes and no response associated with the probability of the data to be compacted and whether the data falls within that probability.